The Role Of Government Policy In Promoting Innovation In Small And Medium-Sized Enterprises

Abstract

This thesis examines the role of government policy in promoting innovation in small and medium-sized enterprises. It focuses on financial instruments, taxation, regulatory conditions, innovation infrastructure, public procurement, digital transformation, and cooperation between business and research institutions. The study applies qualitative content analysis and a comparative review of academic and institutional sources. The findings indicate that well-designed public policy reduces financial and technological barriers, improves access to knowledge, and supports the commercialization of new products, services, and production methods. However, policy effectiveness depends on transparent implementation, coordination among institutions, equal access for enterprises, and regular evaluation of results. Excessive bureaucracy, fragmented programmes, unstable regulations, and poorly targeted subsidies may limit innovation outcomes. The study concludes that government policy should combine financial assistance with capability development, digital infrastructure, market access, and institutional cooperation in order to generate sustainable innovation among small and medium-sized enterprises.